HR and Employee Screening Issues Affecting your Business

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National Retailer Settles $3 Million Class Action for Alleged Deficiencies in FCRA Compliance

Improper Adverse Action Procedures and Dated FCRA Forms Cited

Plaintiff Eric Dante Pitt alleged KMART Corporation failed to comply with FCRA-mandated authorization and disclosure requirements prior to conducting a background check on him for purposes of employment.

Pitt also alleged the company denied him employment because of the results of a background check, and the adverse employment decision was made before he received a copy of his report and summary of rights or KMART did not provide these in a “meaningful and reasonable time.”

Pitt also alleged the Summary of Rights Under FCRA form KMART eventually sent him was an outdated document, and not the current form required by the CFPB/FTC. KMART denied all of plaintiff claims and further denied any wrongdoing and any liability.

The parties, which have been in extended (and presumably expensive) negotiations since the case was initially filed in October 2011, have reached a proposed class action settlement, which was filed in the United States District Court, Eastern District of Virginia – Richmond Division in late January of 2013.

The settlement proposal includes establishing a $3 million settlement fund for purposes of relief for 64,506 class members, with each receiving a cash payment of $29-$59 (or $18-$38 if plaintiff fee and cost requests are granted).

This case demonstrates the need for employers to periodically review employment screening procedures with their background check provider’s compliance department to prevent unnecessary liability exposure. At a minimum, a review of pre-employment screening authorization forms, FCRA Summary of rights form and adverse/pre-adverse procedures should be undertaken to ensure compliance.